Factors affecting audit fees of Philippine listed non-financial firms

• Main Authors: Advincula, Miguel Marciano M., Ocampo, Rafael Q., Pamaran, Joshua T., Menghrajani, Pramela D.
• Format: text
• Language: English
• Published: Animo Repository 2016
• Subjects: Auditors > Philippines > Salaries
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/5994
• Institution: De La Salle University

Companies are legally required to audit their financial statements to prove and assure that the data they input are accurate, complete and legitimate. To do so, auditors are hired to assure the fair representation of financial information in all disclosures to be submitted to the Bureau of Internal Revenue and Securities and Exchange Commission. In exchange, the auditors charge a certain amount of audit fee for the assurance services they provide their clients. The amount of audit fee charged to the client would depend on the client-auditor agreement and this brings up a problem on audit pricing because of asymmetric information available. Simply put, the auditor does not disclose the basis of audit pricing to its client when determining the amount to be charged for audit. This study aims to discover the relational factors affecting the level of audit fees in an engagement. The research intends to discover the determinants of audit fees charged by auditors. The researchers decided to test the relation of certain characteristics of the audit client as well as one characteristic of the auditing party to audit fees. The variables tested are auditor brand name, auditee age, auditee industry, auditee size, auditee complexity, auditee profitability, and auditee risk. To test these variables, the researchers gathered supporting evidence using previous studies relating to audit fee determinants. The audit fee determinants were then tested on publicly-listed, non-financial companies in the PSE through panel data regression. Based on the findings, it was found that all independent variables, except for Auditee Profitability, have a significant and positive effect on audit fees charged by auditors. Auditee Profitability was found to have an insignificant effect in the determination of audit fees in Philippine companies. The researchers believe that performance materiality is a reason for the insignificance of auditee profitability.